Laurel closes on financing for $142M project

The $142 million Laurel hotel, apartment and retail redevelopment has closed on financing, one of several sizable downtown developments that finally have the money in place to move forward after long delays.

Connecticut-based Spinnaker Real Estate Partners secured the last piece of financing necessary for the redevelopment project at 601 Washington Ave. to start construction and set a target opening date of Jan. 1, 2012. Plans for the historic renovation of the 11-story building include a 212-room Embassy Suites Hotel, 205 apartments and 30,000 square feet of street-level retail space.

The retail space will face Washington Avenue and Sixth and Seventh streets. “If we get it right with the retail, it enhances all the properties around it,” said Amos Harris, Spinnaker’s representative in St. Louis. “The Laurel can have a transformative impact on that quadrant of St. Louis.”

The hotel will occupy floors two through five, and the apartments will be built on the upper floors. Monthly rents will range from $900 for a one-bedroom unit to $2,200 for the largest two-bedroom apartment, a corner unit overlooking Washington Avenue.

The financing includes more than $77 million in federal New Markets Tax Credits from four sources: Baltimore-based Urban Action Community Development LLC, Washington, D.C.-based National Trust for Historic Preservation, New York-based Morgan Stanley, and Central Bank of Kansas City. Combined, the tax credits will provide $19 million in equity for The Laurel.

A loan insured by the federal Department of Housing and Urban Development proved critical to moving the project forward. As credit markets froze in 2008, many projects, including The Laurel, stalled due to lack of financing. Spinnaker closed on a $44.5 HUD-insured loan for The Laurel on May 7, with the AFL-CIO Housing Investment Trust as the investor.

“Without this backing, these kinds of projects just won’t get done,” said James Heard, field office director for HUD’s St. Louis office.

Multiple banks are providing financing for the project, which is receiving state and federal historic tax credits. Bank of America is providing $9 million in bank debt and Great Southern Bank is providing $2 million in bank debt.

Additionally, U.S. Bank made tax credit equity commitments of up to $60 million on The Laurel, as well as two redevelopment projects in the area that also are moving forward: the former St. Louis Centre mall and adjoining One City Centre office tower, which has been renamed 600 Washington.

Trivers is the architect on The Laurel, and BSI Constructors is general contractor on the renovation.

The Laurel, which serves as an entrance to the Washington Avenue loft district, was set to be converted to condos, but those plans stalled when the developer at the time, Pyramid Cos., shut down operations in April 2008. Pyramid and Spinnaker acquired the building for $12.5 million in 2006, and the ownership has since been transferred solely to Spinnaker.

The Laurel building has been vacant since a Dillard’s department store there closed in 2001. The Laurel is connected to the former St. Louis Centre mall by a skybridge over Washington Avenue built in the 1980s that was set to be demolished beginning May 21.

Developers of the former St. Louis Centre mall at Sixth Street and Washington Avenue, shuttered since 2006, closed on financing this month for a $31 million conversion to a parking garage with 70,000 thousand square feet of street-level retail set to be completed in November. Stacy Hastie, CEO of environmental remediation firm Environmental Operations, and Bob Clark, CEO of general contracting and development firm Clayco, are co-developers on the garage portion of St. Louis Centre. Spinnaker is leading efforts to attract retailers to the site.

The new retail space at The Laurel and the former St. Louis Centre is being marketed as the “Mercantile Exchange,” a nod to the area’s historic past. The ground where The Laurel sits was once home to the 1,000-room Lindell Hotel, which hosted visitors to the 1904 World’s Fair.

The Lindell Hotel was razed to make way for the Stix, Baer & Fuller Dry Goods Co.’s Grand-Leader department store that opened with eight floors in 1906. An 11-story addition was built in 1919 on the building’s west side. A ninth floor was added to the lower portion of the property in 1948. In 1984, Dillard’s Department Stores acquired the Stix, Baer & Fuller department store chain, and the store was renamed Dillard’s.

The recession and credit crunch over the last two years halted many large-scale developments, but so far this year, several stalled projects are again moving forward in St. Louis in addition to The Laurel and St. Louis Centre projects. Financing closed April 30 for the $109 million historic renovation of the Park Pacific building, at the southeast corner of 13th and Olive streets. The Lawrence Group is converting the 450,000-square-foot, former Union Pacific building to 232 apartments, 45,000 square feet of office space and 35,000 square feet of ground-floor retail space. The AFL-CIO Housing Investment Trust is investing $63 million in the project, which also has a HUD-insured loan.